Treasury Secretary Scott Bessent told a Congressional committee Tuesday that it’s hard to say how much debt the nation can carry, but said the U.S. won’t default on its obligations and spending constraints tied with growth that can help the U.S. climb out of its financial hole.
“A tipping point in debt sustainability is very difficult to pinpoint, but what is not difficult to pinpoint is a trajectory and the trajectory is unsustainable when and if the markets were to rebel,” Bessent told the Subcommittee on Financial Services and General Government.
Bessent also said that the U.S. would not default on its financial obligations and despite close calls in the past, Congress has always acted to raise the debt ceiling when needed.
Bessent said that while the nation’s $36.2 trillion is “scary,” both he and his predecessor, Janet Yellen, agreed that the more important figure is the debt-to-GDP ratio. GDP or gross domestic product is a measure of economic output. The U.S. debt to GDP ratio surpassed 100% in 2013 when both debt and GDP were about 16.7 trillion. The ratio now stands at about 123%, according to Treasury Department.
Bessent said the plan is to use growth and spending constraints to solve the problem.
U.S. Rep. Steny Hoyer, D-Maryland, said both Democrats and Republicans have run up the national debt.
“We all know that if you spend more than you get, you go into debt,” he said. “And that’s what we do as country, on both sides of the aisle.”
Hoyer said cuts alone wouldn’t solve the debt problem.
“You can cut all of non-defense discretionary spending and you won’t get there,” he said.
The Congressional Budget Office’s most recent projections, from March, show that U.S. debt held by the public is on track to reach its highest level ever in 2029 before reaching 156% of gross domestic product in 2055.
“Mounting debt would slow economic growth, push up interest payments to foreign holders of U.S. debt, and pose significant risks to the fiscal and economic outlook; it could also cause lawmakers to feel constrained in their policy choices,” the CBO report noted.
Candice Tse, global head of strategic advisory solutions at Goldman Sachs, addressed the tipping point issue in a report, but said the U.S. wasn’t there yet.
“The CBO’s assessment is that no threshold can be identified at which the debt-to-GDP ratio would become so high that it makes a crisis likely or imminent, nor is there a fixed point at which interest costs would become so high in relation to GDP that they were unsustainable,” she noted in a 2024 report. “The Penn Wharton Budget Model and International Monetary Fund estimate that U.S. debt held by the public as a percentage of GDP would have to reach 175-200% and 160-183%, respectively, to put the U.S. at risk of defaulting.”
Congress has run a deficit every year since 2001.
